JamesGlynn

The build up of reserves--which has exceeded 1 billion Australian dollars over the past three months--was linked to business with international customers, Mr. Stevens told a business forum in Melbourne.

"On so-called passive intervention, let's just say that was customer business that we decided to keep on the balance sheet because the prices seemed attractive to do that," Mr. Stevens said.

Currency traders call the RBA actions to prevent the currency from rising further "passive intervention" or "intervention by stealth."

By not converting foreign exchange holdings into Australian dollars--the the RBA's usual practice--the central bank has effectively removed a source of demand for the currency.

The Australian dollar has traded above parity with the greenback for nearly all of 2012. It remains within striking distance of 30-year highs touched in mid-2011, prompting increased calls from exporters for a more competitive exchange rate.

The strength of the Australian dollar has persisted in spite of big falls in key commodity prices, significant interest rate cuts and a weaker world economy in the past year.

The Australian dollar's gains over recent years have been fueled in part by a rush by central banks to increase their exposure to Australia's AAA-rated sovereign bond pool. Close to 80% of the bonds now on issue are owned by foreigners.

The RBA has invoked the policy to soak up some of the demand for the Australian dollar from central banks that would have normally occurred in the open market, currency traders have speculated.

The Australian dollar was "a bit on the high side," Mr. Stevens said. At 1000 GMT, it was trading at 1.0392 U.S. dollars.

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